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Banks and financial institutions reported fraud involving INR 1.42 lakh crore over the last five financial years, while recoveries from fraud accounts stood at INR 6,389 crore during the same period. The government informed Parliament that public sector banks have also taken legal action against thousands of wilful defaulters through recovery suits, SARFAESI proceedings and FIRs. Separately, complaints related to recovery agents more than doubled in FY26, prompting the Reserve Bank of India to strengthen guidelines aimed at protecting borrowers from coercive recovery practices.
The central government informed Parliament earlier this week that banks and financial institutions reported fraud amounting to INR 1.42 lakh crore over the last five financial years. During the same period, recoveries from accounts classified as fraud stood at INR 6,389 crore, according to information shared by the Reserve Bank of India (RBI).
In a written reply in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said the Finance Ministry had been informed by the RBI that the central bank does not maintain information regarding action taken against wilful defaulters.
However, based on data submitted by public sector banks, as of the end of FY26, recovery suits had been filed against 15,577 wilful defaulters. Banks had also initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act in 10,894 cases, while First Information Reports (FIRs) had been registered in 7,173 cases.
The minister further informed Parliament that public sector banks had recovered a cumulative INR 52,360 crore from wilful defaulters as of the end of FY26. He added that recovery from fraud accounts remains an ongoing process, with the RBI reporting aggregate recoveries of INR 6,389 crore over the last five financial years.
According to RBI data shared with the Finance Ministry, the total amount involved in frauds reported by commercial banks and All India Financial Institutions during the last five financial years stood at INR 1,42,112 crore. The fraud figures are based on the date on which cases were reported.
The minister clarified that commercial banks include public sector banks, private sector banks, foreign banks, small finance banks, payments banks and local area banks.
Responding to another question in Parliament, Chaudhary said complaints against banks relating to recovery agencies increased sharply in FY26. A total of 18,021 complaints were received during the financial year, compared with 8,623 complaints recorded in the previous year, indicating a substantial rise in grievances.
He informed the House that to improve safeguards for borrowers and ensure greater accountability in loan recovery, the RBI had issued revised directions to banks in late 2025. Under these guidelines, banks have been instructed not to engage in harassment or coercive recovery practices and must carry out proper due diligence before appointing recovery agents. The revised framework was introduced to strengthen customer protection while ensuring that recovery processes remain fair and transparent.
The latest data comes as banks continue to focus on improving asset quality and recovering stressed assets through legal channels, including SARFAESI proceedings, insolvency mechanisms and other recovery measures. Regulatory authorities have also been tightening oversight of fraud reporting, governance standards and recovery practices to strengthen confidence in the banking system.
Source PTI
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